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Technology Stocks : Kulicke and Soffa -- Ignore unavailable to you. Want to Upgrade?

To: Kirsten who wrote (2869)	4/18/1998 8:40:00 PM
From: Ian@SI	Read Replies (1) \| Respond to of 5482

LB's take from the earnings conference call... Headline: Kulicke & Soffa: Reports 2Q98 EPS of $0.39 Author: Edward C. White, Jr., CFA /Tolomy Erpf 1(212)526-5744 Rating: 3 Company: KLIC Country: COM CUS Industry: SEMICO Ticker : KLIC Rank(Prev): 3-Neutral Rank(Curr): 3-Neutral Price : $21 5/8 52wk Range: $58-16 Price Target: $20 Today's Date : 04/17/98 Fiscal Year : SEP ------------------------------------------------------------------------------ EPS 1997 1998 1999 2000 QTR. Actual Prev. Curr. Prev. Curr. Prev. Curr. 1st: 0.02A 0.29A 0.29A 0.28E 0.28E - -E - -E 2nd: 0.46A 0.33E 0.39A 0.31E 0.31E - -E - -E 3rd: 0.62A -0.20E -0.02E 0.45E 0.45E - -E - -E 4th: 0.63A 0.24E 0.23E 0.56E 0.56E - -E - -E ------------------------------------------------------------------------------ Year:$ 1.73A $ 0.65E $ 0.89E $ 1.60E $ 1.60E $ - -E $ - -E Street Est.: $ 0.99E $ 0.91E $ 1.92E $ 1.89E $ - -E $ - -E ------------------------------------------------------------------------------ Price (As of 4/16): $21 5/8 Revenue (1998): 455.2 Mil. Return On Equity (98): 6.9 % Proj. 5yr EPS Grth: 14.0 % Shares Outstanding: 23.7 Mil. Dividend Yield: N/A Mkt Capitalization: 512.63 Mil. P/E 1998; 1999 : 24.3 X; 13.5 X Current Book Value: $12.61 /sh Convertible: YES Debt-to-Capital: 0.0 % Disclosure(s): C, A ------------------------------------------------------------------------------ * Kulicke & Soffa reported 2Q98 EPS of $0.39, beating our estimate of $0.33. A favorable tax rate and more aggressive SG&A cutting than anticipated added $0.06 per share as compared to our estimate. * Orders totaled $93 million, for a book-to-bill ratio of 0.78 for the quarter, reflecting a $28 million order cancellation for high-margin 8060 wire-bonders. The company ended the quarter with a backlog of $104 million. * Management continues to see further softening in the industry outlook given negative customer sentiment. However, management tentatively anticipates an industry upturn by calendar year-end based on feedback from customers. * On a positive note, the company's Flip Chip Technologies (FCT) joint venture achieved modest quarter-to-quarter improvements, and its alliance with PRI Automation to automate back-end operations is progressing well. * We continue to believe that Kulicke & Soffa faces near-term difficulties and consequently remain cautious on the shares. We are maintaining our 3-Neutral rating. ------------------------------------------------------------------------------ BUSINESS DESCRIPTION: K&S is a leading maker of semiconductor equipment whose specialty is assembly -- wire bonding, die bonding, and wafer saws. ------------------------------------------------------------------------------ Highlights: Low Levels of Bookings and Backlog Orders totaled $93 million, for a book-to-bill ratio of 0.78 for the quarter. The company ended the quarter with a backlog of $104 million, down from $131 million at the end of the second quarter. The quarter's otherwise fair results, given current industry conditions, were overshadowed by a $28 million order cancellation for high-margin 8060 wire-bonders. Industry Outlook While capacity utilization levels at assembly customers appear flat month-to-month from a statistical viewpoint, Kulicke & Soffa is seeing a softening industry outlook given negative customer sentiment. Korean customers continue to face financial difficulties, despite strong underlying demand. Management does not believe that the current industry downturn will be as severe, or as long-lived as the 1996 industry downturn, and tentatively expects an industry upturn by calendar year-end. Outlook for 3Q98 & 4Q98 Revenues for 3Q98 are expected to be approximately $100 million and gross margins should be down, given the $28 million order cancellation for high-margin 8060s. The exceptional management team at Kulicke & Soffa continues to implement effective cost-cutting measures, and we are modeling only a $0.02 loss per share for 3Q98. Revenues for the 4Q98 should be in the $105-115 million range with subsequent improvement in the gross margin. We are modeling EPS of $0.23. Mix of Product Sales and Orders Higher-margin 8000 series products accounted for 58% of product sales in 2Q98. Unfortunately, demand for 8060s in 3Q98, given the order cancellation, is limited. Consequently, inventory levels of 8000 series products are relatively high for the company. Flip Chip Technologies & Alliance with PRI Automation The Flip Chip Technologies (FCT) joint venture achieved modest quarter-to-quarter improvements. Break-even results are still two-to-three quarters away. Design-ins and qualification of a break-through technology such as FCT can generally take several quarters, as compared to several weeks for the qualification of new wirebonders, or wedge bonders. Although negative capital spending sentiment of Asian customers characterizes the next few quarters, the company's alliance with PRI Automation to automate back-end operations is scheduled for its first major installment in June in the Philippines.